IDEAS home Printed from https://ideas.repec.org/a/sae/ausman/v49y2024i2p192-213.html
   My bibliography  Save this article

Disclosure policy choice, stock returns and information asymmetry: Evidence from capital expenditure announcements

Author

Listed:
  • Jianguo Chen
  • David Smith

Abstract

This article investigates whether firms commit ex-ante to higher levels of investment transparency and the impact of transparency on stock returns and information asymmetry. We construct a novel measure of investment transparency based upon the extensiveness of profitability forecasts and cost disclosures in new project-level capital investment announcements. Using cross-sectional regression, we find that prior to announcement greater investment transparency is associated with lower information asymmetry. We further show that rather than reporting information strategically on a project-by-project basis, managers commit ex-ante to a disclosure policy that influences the disclosure level of new project announcements, and that a firm-level commitment to fuller disclosure reduces information asymmetry in the days surrounding the announcement. Using event study methodology, we also find that investors react more positively to announcements displaying greater investment transparency. JEL Classification: G14, D83, G31, G30, G38

Suggested Citation

  • Jianguo Chen & David Smith, 2024. "Disclosure policy choice, stock returns and information asymmetry: Evidence from capital expenditure announcements," Australian Journal of Management, Australian School of Business, vol. 49(2), pages 192-213, May.
    • Handle: RePEc:sae:ausman:v:49:y:2024:i:2:p:192-213
    DOI: 10.1177/03128962221127128
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/03128962221127128
    Download Restriction: no
    File URL: https://libkey.io/10.1177/03128962221127128?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    Capital expenditures; committed disclosure; disclosure policy choice; information asymmetry; information disclosure; investment transparency;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ausman:v:49:y:2024:i:2:p:192-213. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.agsm.edu.au .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.